Prescription drugs are central components to mental health treatments. Dramatic innovations in psychotropic drugs have occurred over the last 15 years. At the same time spending on psychotropic medications has increased at rates of over 15% per annum in recent years. These increases have been driven primarily by increases in the volume of psychotropic drugs used and by the prices of new drugs. Spending on new psychotropic medications has become a focus of both public and private policy makers. Some analysts have argued that one must look at the system wide effect of new drugs in order to judge their net impact on spending. This application proposes a program of research that will assess the net impact of new psychotropic drugs on health and mental health care spending by examining whether new psychotropic drugs "pay for themselves" by offsetting other health and mental health care costs. We will focus on three specific conditions: major depression, bipolar disorder and schizophrenia. Evidence will be assessed from clinical trials via the use of meta-analysis. The major thrust of the research will use data from a large insured population for the years 1991-2000 and from the Florida Medicaid program for the years 1993-2002. An econometric model will be specified and estimated using instrumental variables methods to bolster the inferences from the observational data. Finally, we will examine the proposition that offsets occur differentially across racial and ethnic groups, for high utilizers and according to the organization of insurance arrangements. [unreadable] [unreadable]